How much down payment does a DSCR loan require?
Most DSCR lenders require 20 to 25 percent down on a purchase, which means a maximum loan of 75 to 80 percent of the price. Cash-out refinances usually cap at 70 to 75 percent of appraised value, and both numbers drop when the coverage ratio or the credit score is weak.
The typical numbers
| Transaction | Typical maximum loan-to-value | Cash you bring |
|---|---|---|
| Purchase, strong file (DSCR 1.25+, credit 740+) | 80 percent | 20 percent plus closing costs |
| Purchase, standard file | 75 percent | 25 percent plus closing costs |
| Purchase, thin ratio or credit under 680 | 65 to 70 percent | 30 to 35 percent |
| Rate and term refinance | 75 to 80 percent | Equity already in place |
| Cash-out refinance | 70 to 75 percent | Equity already in place |
These are typical ranges. Each lender sets its own grid, and the grid moves with rates.
What pushes the down payment up
A thin coverage ratio. Below 1.00, most lenders step leverage down five to ten points.
Credit. Under 680, expect five points less leverage; under 660, the pool of lenders shrinks and the down payment rises again.
Property type. Two to four units, condos, and short-term rentals often carry a five-point haircut. Five to ten unit buildings usually cap at 70 to 75 percent.
Loan size. Loans above $1.5 million to $2 million often cap at 70 to 75 percent.
First-time investor. Some lenders cap leverage at 75 percent for a borrower with no rental history.
Where the money can come from
- Seasoned funds. Cash that has been in your account for 60 days or more.
- Business funds. Accepted when you own the business and it can spare the money.
- Gift funds. Accepted by some DSCR lenders, usually with a gift letter; others do not allow them.
- A HELOC or cash-out on another property. Accepted, and lenders will count the new payment in your obligations.
- Retirement funds. A withdrawal or a self-directed IRA purchase, subject to the plan's rules.
Seller carrybacks and second mortgages behind a DSCR loan are rarely allowed. Assume the down payment has to be your own funds or a permitted gift.
Closing costs on top
Budget two to four percent of the loan amount for lender fees, title, escrow, and prepaid taxes and insurance, plus the appraisal. Reserves are checked after the down payment and closing costs leave your account, so a borrower who empties every account to close will be short. See the reserves answer for the typical three to six months.
How CommFi handles it
Our lending desk prices the deal first and funds direct when it fits. When the property or the file needs a lender with a more generous leverage grid, the desk searches a database of 7,000+ lenders and the ones that fit compete on leverage and rate. Zero upfront fees.
Related reading
Related questions
- Can I get a DSCR loan with 10 percent down?
- Rarely. A few lenders go to 85 percent on very strong files, but 20 to 25 percent is the standard range.
- Can I use gift funds for a DSCR down payment?
- With some lenders, yes, with a gift letter. Others require your own funds. Ask before you apply.
- Does a higher down payment lower my DSCR rate?
- Usually. Lenders price by leverage tier, so moving from 80 to 70 percent loan-to-value often earns a lower rate.
- Are closing costs included in the down payment?
- No. Budget two to four percent of the loan amount on top of the down payment for fees, title, and prepaids.
- Can the seller carry a second mortgage behind a DSCR loan?
- Most DSCR lenders do not allow secondary financing at closing. Assume the down payment must be your own funds or a permitted gift.
Property developer and licensed appraiser. 22+ years in real estate: TIC conversions, multi-unit redevelopments, mixed-use, fix and flips, commercial DSCR.